World stocks and the US dollar rallied on Tuesday after data showed US manufacturing unexpectedly picked up last month, soothing recent worries about the global economy.
The Australian dollar fell nearly 1 percent against its U.S. counterpart after the Reserve Bank of Australia slashed rates by a deeper-than-expected 50 basis points. Domestic government bond yields hit 60-year lows. U.S. factory activity expanded in April, the Institute for Supply Management said, with its index of national factory activity rising to 54.8 from 53.4 in March, above expectations of 53.0. World stocks posted a loss of about 1.5 percent last month as worries about global economic growth resurfaced after data showed the U.S. economy cooled in the first quarter and the euro zone recession is deepening. “It shows we may be coming out of this little bit of a lull that manufacturing has had here over the last couple of months,” said Peter Jankovskis, co-chief investment officer of Oakbrook Investments in Lisle, Illinois. “Europe (recently) flared up and our numbers slackened, but if this trend can be continued the focus will come back to the U.S. economy and that should be a positive for the market.” The MSCI’s world equity index .MIWD00000PUS gained 0.4 percent to 329.89. Trading was limited with many markets in Asia and Europe closed for the May Day holiday. On Wall Street, the Nasdaq Composite was up 1 percent and the S&P 500 hit a 1-month high. The Dow Jones industrial average .DJI was up 87.72 points, or 0.66 percent, at 13,301.35. The Standard & Poor’s 500 Index .SPX was up 12.80 points, or 0.92 percent, at 1,410.71. The Nasdaq Composite Index .IXIC was up 31.39 points, or 1.03 percent, at 3,077.75. Adding to bullish sentiment were signs of recovery in Chinese manufacturing. China’s Purchasing Managers’ Index rose to a 13-month high in April, suggesting the world’s second-largest economy has found a footing and may be recovering from a first-quarter trough. The FTSEurofirst 300 index of top European shares .FTEU3 was up 0.4 percent at 1,047.62. Emerging market shares .MSCIEF gained 0.1 percent. The dollar rose 0.5 percent to 80.20 yen, rebounding from a low of 79.62, its weakest point since February. The stronger yen hit Japan’s export-related equities, sending the Nikkei index .N225 down 1.8 percent to a 2-1/2-month closing low. The euro slipped 0.1 percent to $1.3221. In the commodities market, Brent crude rose 47 cents to $119.95 a barrel while U.S. crude rallied $1.36 to $106.22. Gold inched up to a two-week high and last traded around $1,662 an ounce. The benchmark 10-year U.S. Treasury note was down 9/32, with the yield at 1.9488 percent.
